Valuation of Tesla
A video from Herbert Ong has a Wall Street analyst, Nicholas Colas, sharing a very honest, articulate, and eye-opening take on Tesla. He shares who he thinks the two final automakers will be in the world, and one of them is surprising.
Tesla is valued the reason it is - with around a $700 billion market cap because of the potential of its businesses and its ability to thrive and survive in the future. Nicholas Colas calls it a call option, and he is bullish on autonomy. He says this eye-opening statement, which I will paraphrase:
"When you're making a bet on Tesla, you're making a bet that they do develop truly functioning autonomous vehicle technology, and they should get there. If they can't get there, I'm not sure who can. The minute you waver, if you wake up in the middle of the night and think, oh, my goodness, can they really do it? Then it's too risky a stock for you."
Tesla certainly seems to be in the pole position to solve autonomy with the millions of vehicles it has on the road gathering data and the clusters of computers it has processing this data as well.
Nicholas thinks that the other automaker besides Tesla that will survive the decade is Toyota, and he thinks that is why they have an over $300 billion market cap. Nicholas has toured their plants and sees them in a position to succeed as well.
I see Tesla as the following businesses, which will likely grow bigger in the future:
* Selling electric vehicles
* Tesla Insurance on those electric vehicles
* Tesla energy
* Tesla software and services (like FSD)
* Tesla licensing deals
* Tesla bot
You can break down these main areas of Tesla into many different segments, but these are the main ones. Each of these on their own has the potential to become a giant company by itself, let alone having them all in the same company.
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Where Will Tesla End Up?
I think Tesla will solve autonomy, and the big question is when? I don't think it's a matter of if anymore. Tesla will hopefully have its first robotaxis in service around 2024 some time. It might be a year or two after this, but they will get there eventually.
The second part of the equation is battery technology. Most people I talk to who don't have a Tesla are concerned about range and the life of the battery. What's interesting is that I know my 2022 Model 3 RWD battery will likely outlast the life of the car. But, the battery does degrade and lose range over time, especially as you fast charge and charge to 100% often - even with LFP batteries.
This has to get resolved for most people to own a Tesla and drive it, but, if Tesla solves autonomy, then people aren't going to care about the battery and range - they are going to care about getting in a safe car that is cheap and readily available and at that point, it won't matter. If Tesla can solve autonomy, the battery question goes out the window - especially if they get the costs down to a very cheap level, which I think they will eventually do.
I expect Tesla to end up at around 5x its currently valuation by the end of the decade and with Tesla bot in the mix, it could get to another 5x to 10x after that - but that product is a wild car. Who knows when it will be ready for mass production and use.
Either way, I'm excited to see the future of Tesla and what happens - owning the stock is not boring.
$TSLA investors, I highly recommend you all watch this interview!
Nicholas Colas is likely the most credible person to speak on Tesla that I know of given his background.
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What do you think?
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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News. Image Credit, Herbert Ong, Screenshot